Florence Lustman, présidente de la FFA

But what are insurers doing in this crisis? Analysis by Florence Lustman

The “war” against coronavirus is entering its third week. Each day that passes is a new battle for families who lose a loved one, for doctors and nurses struggling in our hospitals, for parents working from home at the same time as taking on the role of teachers for their children, for employers and employees fighting to saving their businesses.

The insurance sector plays an essential role in the economy. Our priority now is to remain as close as possible to our insured parties by maintaining the continuity of our services. With or without lockdown, insurers continue to receive claims … 90% of our members are now using remote working and are therefore able to continue to protect and advise their customers. The health crisis has given rise to an economic crisis and insurers, as risk carriers, are clearly affected. The reduction in activity, the rise in health and protection costs associated with the epidemic and the surge in certain claim categories such as theft will have a very serious impact. Markets have also fallen sharply, which will affect the investments that underpin our obligations to our customers.

Faced with this situation, our objective is first and foremost to protect our insured parties and their savings. French insurers entered this crisis in a position of strength: the crisis will affect them, but they have the capacity to meet all their contractual obligations. 

I understand why many people are questioning our role in this crisis and are asking us to go very much further than our contractual obligations, which were used to calculate the premiums. Unfortunately, insurers cannot work miracles with the money entrusted to them. The European and US insurance authorities have just highlighted the fact that forcing insurers to provide retroactive cover for risks not covered in their contracts would expose the sector to risks of insolvency that would weaken the protection provided to insured parties, adversely affect market stability and end up worsening the current crisis. Insurers must therefore stand firm; not doing so would significantly exacerbate the current crisis.

Business interruption losses suffered by French companies as a result of the lockdown will without doubt be in the tens of billions of Euros, a sum that no actor other than the State can bear on its own. This is why the insurance industry never provides cover in the event of epidemics, revolution or war, because the consequences of such events are quite simply beyond its capabilities. The principle of insurance is the pooling of risk: it works when an insurer can share a risk among its insured parties, in other words when it can use the premiums paid by the majority who do not suffer a loss or injury to compensate those who do. This is clearly impossible in the case of an event that affects everybody at the same time and with full force …

Despite this, and in view of the dramatic situation we are seeing on the ground every day, insurers have announced exceptional measures of solidarity to support our most severely affected compatriots: micro-enterprises, craftworkers, tradespeople, self-employed workers and vulnerable people. Insurers are continuing to provide cover as usual under the contracts of micro-enterprises experiencing difficulty in paying their premiums during the lockdown and will defer the rent of micro-enterprises and SMEs in difficulty. Insurers will also pay daily sickness benefits for up to 21 days to pregnant women and those with a long-term health condition who have been placed on sickness absence under the new Social Security procedure – i.e. without being declared sick – even though this situation is not covered by their contracts. Finally, insurers have committed to contributing 200 million Euros to the solidarity fund set up by the State for small enterprises in crisis. We are currently the only sector to have contributed to this fund. And, in addition to these general measures, there are also all the solidarity actions taken by individual insurers: the donation of hundreds of thousands of masks, several tens of millions of Euros to fund hospitals and research, free educational assistance and psychological support, free mutual support platforms, etc.

Overall, taking into account all these measures and the direct effects of the crisis, the impact on the insurance industry is already more than 3 billion Euros.

Solidarity will be essential to enable us to emerge from this crisis, but it will not be sufficient to repair all the consequences of the coronavirus. Even though the French insurance system is among those that provide the highest level of protection in the world, it is clear today that the traditional protection mechanisms are not sufficient to deal with such crises. Insurance cannot take the place of the State. Nevertheless, it can shoulder its responsibilities in accordance with its capabilities – and indeed it is already doing so –  and put forward proposals for the future.

One thing we can do now to prepare for future crises of this type is to think about the basis of an insurance-type system that would be able to cover large-scale health disasters. We must not, however, make the mistake of thinking that insurers can cover such events on their own. The system must be based on a partnership with the State. That is why the FFA has decided from today to launch a debate with the aim of submitting proposals to the public authorities in this regard.

Florence Lustman, president of the French Insurance Federation